Lease Option Forms and Contracts
I regularly receive questions about lease option forms and contracts and
respond to them for the benefit of everyone interested in a lease option forms
and contracts. If you have questions about the lease option process, please
leave them in the comment box below.
Lease Option Contract Q&A
Q #1: I sent out postcards this week for sellers interested in a lease option and
just got a response from a homeowner who seems to be the perfect
candidate for a lease option. She owns a condo town-home, which is my
concern. Can a lease option contract work with condo owners?
A #1: Sure a lease option contract will work IF you are in an area where
condos are a “cool” or a “good” thing to own. I live in the Michigan, and
they are not the best here (only in a few select areas), but in Chicago
they are very hip. A lease option contract can work with a condo in
the right areas. Consider though who will pay the home owner
association fee – I would want the seller to remain responsible for this
fee.
Q#2: A single woman with a three bedroom, three floor town-home, wants to
live in Germany part time and stay with her son here in NJ the other
months. She has a low mortgage (has not told me exactly what yet) and is
willing to rent and pay for the monthly HOA. When I asked if she wanted
to sell with a lease option, she said yes! She did ask me what I charged to
do this and I told her nothing through my lease option contract company.
She asked how I make money then and I told her through the buyer. I also
revealed I am a licensed Realtor and that I could charge commission.
The property was built 2003 and she bought it new.
The lady revealed that she has an appointment with a Realtor friend a
few hours after my scheduled appointment with her on the weekend.
Please advise regarding the above. Thanks and I look forward to hearing
from you.
A #2 What does the seller REALLY want to do? Sell out right or get some
cash flow? The other important thing when dealing with any home
owner that is considering a lease option contract with you and has
suggested that they might list with a real estate agent is that you have
them ask their Realtor to “Make YOUR NAME an exclusion to the listing
contract”. This is Realtor language to protect the seller and you from
the additional fees that would be charged if this were not in their
agreement with their agent. Write this down – as it is the exact
language used by most real estate agents in the business. This way if
they don’t sell it and you buy it the owner is not responsible for
commission. If they don’t put this in there it will affect the seller’s
bottom line and therefore yours also.
Q #3: When you sign the lease option contracts and forms is that exercising
your lease option contract?
A #3: No, signing the lease option contacts and forms is not the same as
purchasing the property. It gives you an exclusive right to purchase
the property by a specific date but does not require you to make the
purchase. Exercising the lease option requires completing the same
purchase agreement that buyers use for a traditional purchase.
Q #4: I read that if you sell a home on a lease option contract and don’t close
before 3 years you loose the capitol gains exemption. If that happens,
couldn’t you close with the mortgage that you could afford and take a
second? (making sure we are in full disclosure of the lending company of
course).
A #4: Do sellers in your area have lots of capital gains now? If not, it’s not an
important thing for you to be worried about. Only when you know that
have a huge gain. Not equity. Gain.
Q #5: Is an Offer a cash out deal? I’ve only closed on 4 deals I don’t know the
difference between terms and offer. If I offer $3000 down and $1000 a
month isn’t that terms?
A #5: Terms are what go into an offer. Like monthly payment, lease option
contract fee, down payment, price, etc. The offer is the purchase
contract signed with the terms included.
